USA Economy: Demographic Profile

An
elderly woman attends a rally for immigration
reformREUTERS/Lucas
Jackson

Strong population growth of around 0.8% per year over the next
five years will be driven by a combination of natural increase
and immigration.

Immigration
accounted for much of the total growth in the population over the
last five years, and The Economist Intelligence Unit expects the
contribution from immigration to remain firm in the forecast
period.

Immigration slowed slightly after the 2008-09 financial crisis
because the deep recession diminished the attraction of the
American labour market. As the economy recovers at a faster pace
than that of comparable OECD countries, US employment
opportunities are likely to look more attractive once again.

Natural population growth, at around 0.6% per year, is strong in
comparison with most other developed economies, partly reflecting
the presence of a large number of first-generation immigrants who
tend to have a higher fertility rate than native residents.

Labour force participation has been on a downward trend for some
years. We expect the ratio to recover only modestly as workers
who were discouraged by the lack of opportunities in the labour
market gradually return to the workforce. In the long term, once
the recovery is complete, female labour force participation is
unlikely to resume its earlier upward trend, given that it has
already reached a very high level.

Male labour force participation was declining slightly before the
crisis, but the lowering of household wealth as a consequence of
the bursting of the housing bubble may reverse that pattern and
slow the trend for male workers to retire early. The retirement
of a large generation of "Baby Boomers" will also increase the
retiree population at the expense of those of working age.

All the same, the US population is relatively young compared with
other developed countries. The ageing of the population and the
need for reform of Social Security (the federally funded pension
plan) are causes for concern, but the number of people aged 65
and over is not set to rise particularly fast during the forecast
period. The percentage of the population in this age bracket will
climb to 15.7% in 2018, from 13.9% in 2013.

Immigration
reform is one of the few major issues that has a chance of
overcoming congressional deadlock, partly because it is in both
parties' electoral interests to attract the votes of the
fast-growing immigrant population. The central elements of a
widely discussed plan are the establishment of a path towards
legalisation (and possibly citizenship) for an estimated 12m
illegal immigrants, allied with stricter border enforcement
mechanisms.

The latter are meant to prevent the inflow of new immigrants
seeking similar legalisation, but may not be able to stem the
flow. Measures to ease a shortage of highly qualified workers in
some sectors are also likely to be part of the plan.

Yet, the push for legislation has lost momentum as House
Republican leaders have decided to avoid an intra-party skirmish
before the mid-term elections in November and delay these reforms
to a less politically sensitive time.